Thursday, 31 October 2013

The fizzy drink tax crusade goes on

Despite the political and economic fiasco that was Denmark's fat tax, the public health racket is determined to bring in a tax on fizzy drinks. They had a go in January and had another (barely reported) stab at it during the party conferences. Now they've taken a leaf out of the Minimum Pricers' book by making a computer model. It's published in the British Medical Journal so will probably get a large amount of press coverage. (This is not the first attempt to model the effect of a fizzy drink tax. A 2011 effort produced results that, upon inspection, were utterly negligible.)

One of the co-authors is Mike Rayner, a man with the most interesting conflicting interest in science because he believes that he is literally doing the Lord's work by making the poor pay more for their cola. He and his colleagues modelled the effect of a 20 per cent tax on sugar-sweetened drinks on consumption and on obesity.

Their estimate for consumption looks reasonable enough. They use a price elasticity of -0.9, which is in line with previous economic estimates. In other words, a 10 per cent increase in price results in a 9 per cent reduction in consumption.

Their estimate of what effect this would have on obesity is, however, essentially a guess. One problem with these kind of models is that it is well known that increasing the price of one product leads to people buying similar, cheaper products (which might have more calories). The authors of the study shrug this off, saying that the substitute
drinks "are probably less harmful for health." Since fruit juice contains more sugar and calories than many fizzy drinks, this is debatable.

All that
aside, their projected reduction in obesity is just 1.3 per cent. They
admit that this is "relatively modest". That's putting it mildly. It's a feeble outcome—virtually a rounding error—and yet they estimate that this will cost the British people £276 million per annum (tellingly, they say it will "raise £276 million"—from where, the ground?).

News of the cost-of-living crisis obviously hasn't reached the offices of the British Medical Association. As with minimum pricing, people on six figure salaries are telling people on four figure salaries that they're paying too little for their shopping.

Like most models, it's garbage-in, garbage-out. If you tell the computer that Policy X will reduce obesity/mortality/employment/hospitalisations, the computer will give you a reassuringly precise figure. It won't tell you if your assumptions are correct.

It's better to look at places that have actually introduced taxes on fizzy drinks, as Fletcher et al. did in their 2010 study in the Journal in Public Economics. They concluded that there was...

...a moderate reduction in soft drink consumption by children and adolescents. However, we show that this reduction in soda consumption is completely offset by increases in consumption of other high-calorie drinks.

That's the USA. We might also look at Denmark which announced that it would be abandoning its soda tax a few months ago. Why? Because...

A soda tax in Denmark didn't lead to people drinking fewer sugary
beverages. Instead, they just headed next door to Germany, where sodas
were cheaper.

No UK media reported that the Danes had abandoned the tax, nor that they have cut beer tax. Funny how the public health lobby told us that the eyes of the world were on Denmark when they introduced these sin taxes, but their eyes were averted when the taxes were abolished after delivering no health benefits and being tremendously unpopular. Sadly, Rayner's model does not factor in unpopularity.

This work has not considered public opinion, which may be critical when deciding whether a tax is adopted.

Let's hope so.

UPDATE
The BBC can't help itself. When I woke up, their headline read...

'Sugary drinks tax would have "modest" effect on obesity'

This is an accurate summary of the study, but apparently was not sufficiently persuasive enough for the public health lobby. I suspect a phone call or two may have been made because the headline now reads...

Sugary drinks tax "effective health measure"

This is not an accurate summary of the study. It is not even an accurate summary of the sentence from which it is taken from which says "we have shown it could be an effective public health measure" (my emphasis).

How craven, but how typical, of the BBC's online health team to throw a perfectly good headline down the memory hole for the sake of propaganda.

2 comments:

I fervently hope that publication in the BMJ will soon cease to be a guarantee of publicity in the media. This month the BMJ abandoned science and decided that it would publish articles based on their ideological correctness rather than their merit. It's standards have plummeted under the current editor who is appalling but very much a person of her time.

About Me

Writer and researcher at the Institute of Economic Affairs. Blogging in a personal capacity.
Author of Selfishness, Greed and Capitalism (2015), The Art of Suppression (2011), The Spirit Level Delusion (2010) and Velvet Glove, Iron Fist (2009).

"Of all tyrannies, a tyranny exercised for the good of its victims may be the most oppressive. It may be better to live under robber barons than under omnipotent moral busybodies. The robber baron's cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end, for they do so with the approval of their own conscience."